Don’t Be Spooked By Insider Selling

By Grace L. Williams

Throughout our coverage of transactions by insiders over at Inside Scoop, an overall selling trend has dominated our headlines for the past few weeks: Just this month, we’ve seen sales at SandRidge Energy (SD), DirectTV (DTV), Lowe’s (LOW) and Starbucks (SBUX).

We aren’t the only ones to have noted this. The experts over at InsiderScore recently released a report that took a closer look at some aspects of the recent trend of continued selling. Their conclusion is that while there’s been a lot of selling recently, it’s not at the sort of levels that should cause concern for investors.

InsiderScore says that an uptick in selling during the fourth and first quarters is to be expected because insiders cash in shares for tax purposes during the fourth quarter, while restricted stock and options often vest during the first quarter. They add:

Given the incentive to sell ahead of potential tax-rate increases, we would expect some selling that would have normally occurred during the first quarter to move up to the fourth quarter. With this in mind, we examined selling data in a bucket comprised of November through February then broke out March separately since the month is not yet complete.

As the chart below shows, InsiderScore discovered that for the S&P 500, selling in the November-through-February period is lower than that in the same period from 2010/2011, as well as the three years before the market meltdown. They add that March selling is lower than March 2012.

Insider Score

(Click on the chart for a larger version.)

The report closes:

We have less conviction regarding the efficacy of insider selling than insider buying. Accelerations in insider selling levels have preceded additional gains in the market (see December 2012 and November 2010 for two recent examples). In aggregate, current levels of selling are not dissimilar to prior market periods, especially when accounting for the recent rise in equity prices.

This is good news for anyone fearing a run for the exits by insiders. Meanwhile, we’re still in pursuit of those notable buys and we’ll see you over at Inside Scoop.

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MARCH 30, 2013 2:42 A.M.

Tetse wrote:

After the new leadership is in place and the CEO is forced to quit or remain with figurehead status the company will be able to restructure financially. The company is also ripe for a takeover sale. It's mining assets are huge and LNG is the future.

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